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Dive Brief:

Tired of drug shortages and the high prices of lifesaving medicines, a group of large U.S. health systems announced on Thursday plans to launch its own nonprofit generic drug company.

The systems — Intermountain Healthcare, Ascension, SSM Health and Trinity Health in consultation with the U.S. Department of Veterans Affairs — represent more than 450 hospitals nationwide. Additional health systems are expected to join the initiative.

The newly formed, unnamed company hasn't yet disclosed what drugs it will manufacture, but the groups said it will focus on those prone to shortages and price manipulation.

Dive Insight:

The systems' aim is to create an FDA-approved pharmaceutical company that will either make generics directly or subcontract the manufacturing to a licensed contract manufacturing organization.

“The best way to control the rising cost of health care in the U.S. is for payers, providers and pharmaceutical companies to work together and share responsibility in making care affordable,” Laura Kaiser, president and CEO of SSM Health, said in a statement. “Until that time, initiatives such as this will foster our ability to protect patients from drug shortages and prices increases that limit their ability to access the care they need.”

A notorious example is Martin Shkreli leading Turing Pharmaceuticals to hike up the price of toxoplasmosis drug Daraprim from $13.50 per tablet to $750.

Other examples include Valeant picking up Isuprel and Nitropress and increasing prices by six-fold and three-fold respectively, and Mylan hiking up EpiPen prices by more than 400%.

At the same time, drug shortages have been a recurring problem for hospitals over the past decade. For example, hospitals last spring faced a shortage of medical-grade sodium bicarbonate, forcing treatment delays and transfers of patients to better-stocked facilities. The problem started when Pfizer announced its supply of the drug was low, causing an increase in demand for its sole competitor, Amphastar, depleting its stock as well.

Building out a pharmaceutical company is one means to combat the inherent challenges systems are facing with softening admissions, while building out a stable revenue stream. While the company may be nonprofit, the company could create the opportunity to build brand awareness and make their facilities a one-stop shop if and when patients need a quick prescription.

It's yet to be seen how these plays and mergers could reshape the industry and how it affects patients, but it's obvious health executives are trying to get ahead of the problems they've been facing.